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Another Clean Energy Index: Investors Come Together; Shaking Up the SRI Industry?

Issue 21: October, 2004

SB20 Company Spotlight

Timberland (NYSE - TBL), the only apparel retailer on our SB 20 list of the world's top sustainable stocks, beat analyst estimates for the third quarter. TBL's 3Q profit jumped 29% on gross margin expansion and revenue gains.

"We are targeting mid single-digit revenue growth for the balance of this year and believe that we are on track towards delivering strong revenue growth and double-digit profit gains in 2004," president and chief executive Jeffrey B. Swartz said in a statement. Analysts predict continued strong growth for 2005.

In a Motley Fool editorial, Taking Timberland for a Walk, the author says the stock is mildly overpriced, but would be a good buy on a dip. He's excited by its return on equity of 30.97%, praising TBL for its healthy cash flow, zero debt, and strong net profit margin. Timberland is a solid company, he says. Its only problem is the industry they're in - he's generally nervous about investing in companies that rely on fickle retail customers.

In addition to this strong financial news, we recently received some solid news on their corporate responsibility. One of our subscribers asked the question, "You say in your summary of TBL that "all employees get 40 hours paid time off a year to do community service." That may be the case for the comparatively few employees still working in this country but I'm doubtful the policy would include the vast majority of workers in foreign countries, would it?"

Thinking we would get the inevitable response proving companies still only scratch the surface in terms of responsibility, we were very pleasantly surprised to receive this thoughtful reply from Bonnie Monahan, VP, Business Development:

All full time employees of Timberland both domestic and international get 40 hours of paid time off a year to do community service. Timberland is committed to improving the communities where we live and work, including where we make our products. Beyond auditing and compliance, we want to drive efforts to support long-term change. This means partnering with local institutions to build understanding with our manufacturing partners and their factory workers, management as well as government agencies and others, on how to continually improve conditions of workplaces and communities. In these partnerships we include activities that benefit workers and communities in the short term.

To develop meaningful programs, we have interacted with many organizations that offer insight into local needs. They include: Verité (China, India, Turkey) CARE (Bangladesh, Vietnam) World Education CIPAF (Dominican Republic) SUMMA (Dominican Republic) Chinese Working Women Network (China) Population Council (Thailand) Oxfam (Dominican Republic)

Timberland partners with local NGOs and international agencies to bring about change in working conditions. Our goal is to make sustainable improvements in working conditions and quality of life. Here are just a few examples:

In China: Timberland helped Verité create the Life Skills Training program to address practical skills, basic education, Chinese labor law, our Code of Conduct, wage calculation, health (including HIV/AIDS and SARS) and nutrition. Workers of our manufacturing partners have also requested topics like computer use, English, and cooking. Over 7,000 workers have benefited from these programs. World Education created the peer education concept for this program that is currently being utilized.

In the Dominican Republic: Our focus in the Dominican Republic has been on education for the employees of our factory and their families. The factory office staff saw a way they could help others. They began literacy classes for fellow workers. Since their initial effort, we've continued to offer basic education courses for which employees can receive government certification. We've also created a high school equivalency program. To help the children of our employees, we partner with local organizations and the Ministries of Education and Health to reach out to the community, helping over 6,000 students so far. By focusing on sustainable change, Timberland promoted community involvement in finding solutions for area schools. The school Timberland officially adopted raised funds on its own to build additional classrooms and a chemistry lab.

In Vietnam: Timberland partnered with CARE to offer a program focusing on improving the quality of life for production workers of our factory partners. It included topics like gender issues, workplace communication, basic education, healthcare, financial management and occupational safety. The program's reach extended beyond workers making Timberland® product, activities included an HIV/AIDS awareness event that was attended by over 3,000 workers, including those assembling other brands' products. At an event to heighten awareness about HIV/AIDS, more than 3,000 workers attended, including people who make products for other brands. By fostering more substantial participation from our vendors, we are moving toward our goal of sustainability. Timberland plans to expand this program with two other major vendors in Vietnam.

In Bangladesh: Over 8,000 workers of the Chittagong Export Processing Zone (EPZ) have benefited from Timberland's partnership with CARE and our major vendor. CARE implements the project with peer educators-workers training workers. The peer educators cover topics such as reproductive health, HIV/AIDS, financial management, and disaster preparation. The project included creation of a micro-savings and credit program; more than 3,000 workers opened accounts within the first five months. This is their first opportunity to save and take loans. The program has garnered support from the municipality and EPZ administration, which drives sustainability.

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Baldor Electric Company (NYSE:BEZ), manufacturer of efficient industrial motors, and on the SB20 list for the first time in 2004, beat analyst estimates when its third quarter profit jumped by 44% thanks to rising sales. Some of the sales increase is attributable to increased generator sales because of the recent hurricanes. BEZ was able to increase profit even with the rise of copper and steel prices which are integral to their product lines. The company is developing products that minimize their use. Baldor expects to end the year with record sales.

In August 2003, Baldor joined the U.S. Environmental Protection Agency's (EPA) Energy Star program. The company recently completed energy improvements in 13 of its U.S. manufacturing plants, resulting in nearly $1 million in annual cost savings. Since their energy surveys and consumption reduction program began in 2000, they have saved 10 million kilowatt-hours, the equivalent to powering 1,300 American homes for a year.

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